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POST OFFICE LTD BOARD SUB COMMITTEE
Initial Complaint Review and Mediation Scheme
1. Purpose
The purpose of this paper is to:
1.1. provide the Committee with an update on Scheme progress; and
1.2. seek the agreement of the Committee to the course of action set out at paragraph
8 below.
2. Case progress and investigation findings
2.1. Annex 1 sets out the detail about case progress and investigation findings. To
date we have found no evidence, nor has any been advanced by either an
Applicant or Second Sight of either faults with the Horizon system or unsafe
convictions (on the latter point, every case investigated has been scrutinised by
our external criminal lawyers), and no convictions have been appealed.
3. General progress/issues
3.1. Since last summer Post Office has followed the strategy, agreed with the Board, of
operating within the Working Group Terms of Reference whilst taking a less
submissive approach. This has, not unexpectedly, resulted in a concerted attempt
by JFSA to apply pressure to Post Office to mediate all cases where Second Sight
so recommend. Having failed to persuade the Chair of the Working Group that
Second Sight alone should determine whether a case should be submitted for
mediation, JFSA has enlisted the support of MPs and the media in an attempt to
pressurise Post Office into mediating all cases.
3.2. The General Counsel and Communications and Corporate Affairs Director have
provided regular, ad hoc updates for the Board on significant developments over
recent weeks, but in summary:
i. Following discussions and written exchanges with Post Office, James
Arbuthnot MP issued a press release and open letter to the CEO
withdrawing his support, along with purportedly 140 other MPs, for the
Scheme having lost faith in Post Office and its commitment to the Scheme
(although the evidence suggests only a small number of MPs are actively
speaking out against Post Office). The primary reason was Post Office’s
refusal to commit to mediate all cases where Second Sight recommends
mediation. This sparked a limited degree of media interest which was
anticipated and managed so that it did not generate widespread coverage or
materially impact on business as usual activities. A full analysis of the PR
position is at Annex 2.
ii JFSA has engaged Edwin Coe LPP to explore legal options should the
Scheme not resolve Applicants’ complaints. Alan Bates, following an email
from the General Counsel, subsequently confirmed JFSA’s continuing
commitment to the Scheme despite exploring legal options describing its
position as ‘hoping for the best but planning for the worst’.
3.3. The BBC’s “The One Show” featured Post Office and the Scheme for two
consecutive weeks in what was a clearly co-ordinated JFSA/James Arbuthnot
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inspired media campaign. In addition, James Arbuthnot secured a Westminster
Hall adjournment debate about the Scheme and Post Office's alleged lack of
commitment to it (and therefore resolving Applicants’ complaints). The debate was
attended by around 20 MPs, 14 of whom spoke, and received little media
coverage other than The One Show.
3.4. There were a number of elements to the media and MPs’ accusations about Post
Office. However, the main allegations now appear to centre on allegations of
“miscarriages of justice”, accusations about the “unfairness” of the Subpostmaster
contract (the statement made in Parliament - without foundation but apparently
based on a comment from Second Sight — was that “a person would have to be an
economic and legal illiterate to be willing to sign it, because it is so slanted in
favour of the Post Office”) and bad faith by Post Office and its Board. A summary
of the legal advice provided to Post Office on the Subpostmaster contract is at
Annex 3.
4. Analysis
4.1. Whilst Post Office is being accused of bad faith, the evidence suggests the
opposite is true and that it is others involved in the Scheme who have acted in bad
faith.
4.2. Post Office, in its role as Secretariat, has administered the Scheme efficiently and
fairly and, as a party in each dispute, has acted in good faith, abiding by the
obligations of confidentiality which binds all parties involved in the Working Group.
Despite incurring direct financial costs to date of c£5m, and diverting resources
away from Post Office’s strategic priorities, the Scheme appears still not to have
met the expectations of relevant stakeholders, or to have drawn a line under this
issue in a way which might enable Post Office and Applicants to move forward.
4.3. This is not because of poor execution or lack of positive effort on the part of Post
Office, but is instead reflective of the erroneous assumption which underpins the
approach of Applicants and their supporters — that is, that Post Office is
responsible, if not through Horizon then in other ways, for the difficulties they have
experienced and/or the losses they have incurred. This has been exacerbated by
the inappropriate and unjustified raising of expectations by Applicants’ professional
advisers, JFSA and MPs over what the Scheme can, and in their minds should,
deliver in terms of significant compensation payments and/or Post Office support
in efforts to have criminal convictions overturned.
4.4. Post Office brand has, in the process, sustained a degree of reputational damage.
Even if the net volume of media interest has remained relatively low, negative
public perception around this issue now exists and could, if left unchecked, have a
negative commercial impact. Even in circumstances where Post Office might be
free of its obligations of confidentiality and in a position to share more balanced
factual information about the Scheme and the cases in it, the lazy but media-
friendly David and Goliath characterisation of this story would likely retain much of
its appeal, particularly for the small number of journalists who have focused
attention, and their reputations, on insisting that there is a conspiracy at work
against those in the Scheme.
4.5. Against this backdrop, it would be easy to forget that some real positives have
emerged from this exercise.
4.6. Now all cases in the Scheme have been comprehensively re-investigated, Post
Office can be satisfied that the real basis of the Applicants’ complaints is not the
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reliability of the Horizon platform, but the Applicants’ dissatisfaction with how Post
Office engaged with them in their specific case. Further, there is still no evidence
whatever of a systemic flaw in the Horizon system, which is critical to Post Office’s
entire operation across the network.
4.7. Moreover, the investigations have only identified a small number of cases in which
Post Office could have done more to support individual Applicants (whether by
being more timely in providing additional training, in responding to enquiries, or
through other interventions), and even these do not suggest that Post Office acted
unlawfully/outside of its legal rights. The investigations, and Post Office’s
responses to them, could therefore be used to paint a largely favourable picture of
Post Office’s commitment to properly engaging with the individuals running its
network.
5. Challenges
5.1. As well as the challenges identified in the analysis above, the Working Group is
not, in our view, operating in a way which supports the effective resolution of
complaints because of the behaviour of its membership. Specifically:
« JFSA has:
© sought to broaden the scope of the Scheme (notably to include the
Subpostmaster contract), actively solicited media interest and mounted a
political campaign to bring further pressure to bear on Post Office to change
tack.
o instructed a firm of solicitors, Edwin Coe LLP, to raise the temperature still
further while ostensibly maintaining support for the Scheme. It appears that
this support is conditional on the Scheme producing the results JFSA
favours, results which the available evidence simply does not support.
o declined to participate meaningfully in the business of the Working Group.
e Second Sight:
o has not displayed the degree of impartiality Post Office would expect from
independent advisers to the Working Group.
o has recommended almost all cases for mediation, offering little evidence to
support their recommendations other than concluding that mediation might
offer the parties ‘closure’.
© are continuing to attempt to broaden the remit of the Scheme: most recently
through a lengthy list of questions for Post Office to inform a further draft of
their “Part Two” briefing report. This is an approach which closely reflects
the wishes of JFSA and MPs.
5.2. Having been developed with the aim of attempting to resolve individual complaints
about Horizon and associated issues, it seems clear that key stakeholders are
now seeking to distort the Scheme to an extent which Post Office cannot tolerate.
The evidence from recent events suggests that the Scheme will continue to be
labelled as a sham by JFSA and MPs unless it produces a conclusion that Post
Office (whether through Horizon or otherwise) is responsible for the difficulties and
losses of Applicants and for wrongful convictions.
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5.3. In addition, the explicit threat of litigation now requires Post Office to consider
whether disclosure of any further information should be undertaken in accordance
with the Court's prescriptive rules, as opposed to the current voluntary, open basis
in connection with an alternative dispute resolution scheme. This would be a
fundamental departure from the existing Scheme arrangements.
5.4. As noted in previous advice, although Post Office would be seen by the man on
the Clapham omnibus to have acted in good faith, it is clear that there will remain a
small but vocal core of detractors who will not be persuaded.
Conclusion
6.1. In the circumstances set out in this paper, it is now difficult to see how the Scheme
can achieve its objectives and properly function on its current path. Indeed Post
Office now has the opportunity to alter the Scheme to something more realistic
and proportionate to the issues raised in the complaints. What follows is a
proposal and rationale for next steps.
6.2. An attempt to maintain the status quo will entail, inter alia:
i. the continuation of a process conducted in the public eye, with every
unpopular decision of Post Office being questioned and/or challenged in the
media and in Parliament, with obligations of confidentiality preventing Post
Office from making any sort of effective rebuttal;
ii. the completion by Second Sight, likely to coincide with the run-up to the
General Election, of their final Part Two report which, judging from their
approach to date and the questions they have put to Post Office to inform its
content, is near certain to place further unsubstantiated ‘charges’ at Post
Office’s door and broaden, quite unjustifiably, the lines of enquiry it will be
expected to address;
iii. a substantial risk of increased scrutiny in Parliament, perhaps through the
Business, Innovation and Skills Select Committee, bringing with it an
inevitable increase in the involvement and concern of Ministers in respect of
this issue, when we need the focus on other matters of commercial
importance to Post Office;
iv. a lengthy process given that there remain around 100 cases in the Scheme,
the process of moving cases through the Working Group, attempting to
challenge recommendations of mediation by Second Sight no matter how
unjustified and scheduling and conducting mediations is certain to take much
of 2015;
v. pressure to allow new cases in to the Scheme, some of which are likely to
be entirely opportunistic (there is already evidence of this happening);
vi. poor results in terms of public perception since mediation can only resolve
those complaints in which the Applicant has both a legitimate claim and is
prepared to settle on reasonable terms. There are few such cases in the
Scheme with many including excessive and unrealistic claims for
consequential loss which limits the likelihood of a resolution. Post Office will
be accused of bad faith in respect of each ‘failure’ to reach a resolution
which is satisfactory from an Applicant's point of view (and/or that of JFSA
and the MPs). Post Office will not be able to respond to these accusations
while respecting confidentiality; and
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vii. no meaningful reduction in the risk that Applicants, individually or as a group,
will resort to litigation to pursue their claims against Post Office.
Away forward
7.1. January brings a number of important dates and activities in relation to the
Scheme. We are taking a number of steps to mitigate the recent activities of JFSA
and the media including:
i. providing a robust response to allegations in the media including writing to
BBC lawyers where appropriate and engaging at senior levels with
programme editors;
ii. writing to individual MPs who participated in the Westminster Hall debate to
offer a meeting to discuss their, constituent’s cases, with consent and
generally discuss the Post Office position; and
iii, compiling a ‘dossier’ addressing the general accusations made against Post
Office in the Westminster Hall debate which the Minister can be invited to
table in Parliament.
7.2. Post Office responded to Second Sight’s questions to inform their Part Two report
on 7 January 2015, to be followed by a meeting on 9 January 2015 with relevant
Post Office staff to discuss the issues raised in more detail. We plan to decline to
respond to around a third of their 110 questions/requests for information as they
are either out of scope of the Scheme or disproportionately wide ‘fishing’ requests
with no direct reference to complaints in the Scheme.
7.3. The Scheme Working Group meets on 14 January 2015. This provides Post
Office with an opportunity to make a final attempt to get the Scheme ‘back on
track’ by seeking to gain acceptance of and adherence to:
i. the scheme and its processes as originally designed (by all);
ii, the Scheme’s proper scope (Horizon and associated issues only);
iii. the need to respect obligations of confidentiality and actively to promote this
to individual applicants; and
iv. (crucially) the principle that evidence must drive its recommendations and
conclusions.
7.4. Post Office will also use the next meeting to clarify JFSA’s intentions in relation to
the instruction of Edwin Coe LLP (which we consider to be, at this stage, generally
an exercise to exert pressure rather than, at this stage, a real litigation threat (see
Annex 4). However we understand from JFSA’s website that they plan to hold a
meeting on 18 January 2015, primarily for Scheme Applicants. The meeting is
described as being to report back in detail about recent events and to agree
options for a way forward including “what it would mean if we opted to follow a
legal route and how that might work”.
7.5. However, our assessment is that getting the Scheme ‘back on track’ is unlikely.
There would appear to be very little to be gained from a JFSA/MP perspective in
participating in the Scheme on these balanced terms since it will not produce the
pre-determined outcomes they seek. However, providing this final opportunity to
address these issues sensibly will further demonstrate Post Office’s genuine
attempts to resolve Applicants’ complaints.
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7.6. Importantly, it will also help manage and mitigate the risks of negative publicity and
Judicial Review of the decisions Post Office makes about the future of the
Scheme. The risk of a successful public law challenge has already been assessed
as being low — recent legal advice suggests that this step will likely reduce it still
further. A summary analysis of the Judicial Review risk is at Annex 5 (which
aligns with previous advice given to the Board last summer).
7.7. We have now been informed, as expected, that the same BBC team which made
the One Show film is now planning a programme, for BBC Inside Out, on 19
January — the day after JFSA’s planned meeting. We will continue to monitor and
manage the media as we have to date.
Recommendation
8.1 The Committee is invited to note the immediate steps we are taking as in
paragraph 7.1 and 7.2 above.
8.2 The Committee is further invited to agree that we:
i. use the next meeting of the Working Group as a last attempt to set the
Scheme back on track as set out in paragraph 7.3 to 7.4 above;
ii. write to JFSA after their meeting on 18 January to ask them to confirm their
intentions as regards litigation; and
iii. draw up contingency plans to bring the Scheme in-house in the event that
the steps set out above do not get the Scheme back on track which:
* would move the governance and management of the Scheme in-house
(dissolving the Working Group and/or ending Second Sight’s current role);
« would include a letter or statement which could be made public setting out
the rationale for Post Office’s decision to bring the Scheme in-house;
« might include the retention of an independent oversight function in the
interests of transparency and public confidence (not necessarily by
Second Sight);
¢ provide for discussions or, where appropriate, mediations with individual
Applicants, where it is fair and reasonable to do so in order to try to
resolve their complaints; and
© preparing our own report of the Scheme so far and our findings as a
document which could be provided to Applicants (as our response to Part
Two was for mediation) and at the end of the Scheme be published as a
formal report of the Scheme.
8.3 We will revert to the Committee with a detailed proposal (informed by legal advice)
for bringing the Scheme in-house if, as anticipated, we do not get a satisfactory
result from the steps set out above.
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